Difference between a bullish market and bearish market

  

Date Posted: 7/18/2012 4:27:16 AM

Posted By: moff J  Membership Level: Silver  Total Points: 485

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Those of us who follow the stock exchange reports may have had of the terms "bullish market" and "bearish market".
These are investment terms used in the stock markets to refer to two different scenarios in the stock market.

A bullish market refers to a scenario where the share prices trading in the stock market are on the upward trend and this is expected to continue in the foreseeable future. A bullish share reports gains and continues to report gains on its share price for some time. It is in this kind of a situation that traders in the shares attempt to make profits by selling their shares at a price. The demand for such a share is usually high due to the prospects of continued price gains.

A bullish market may be as a result of micro-economic and macroeconomic factors. Micro-economic forces are those internal to a given company such as good management, high dividend payments, expansion projects, high profitability, and employee goodwill.
Macroeconomic factors are those that affect the share prices on an external and large basis such high and stable economic growth rates, low inflation, low interest rates, and business cycles.

A bearish market is one in which the share prices are falling and are expected to continue falling for some time. This could be as a result of operating losses, poor management, uncertainties over the future of a company, economic slowdown, high inflation rates, among other factors.
Investors who trade in the shares offload bearish shares so as to minimize losses expected from price decreases.

Bearish shares do not necessarily insinuate a bad investment portfolio. This is especially so if the factors causing the fall in share prices are macroeconomic such as business cycles or economic growth rate. A bearish market may recover in time and provide good returns for investors especially those

who are willing to take the risk of buying them when the prices are on a downward trend.

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